Are Formal Planners More Likely To Achieve New Venture Viability?

 

This study develops and tests a counterfactual model of the relationship between formal written business plans and the achievement of new venture viability. This is important because extant theory remains oppositional, and there is a practical need to provide guidance to founders on the utility of formal plans. To test our model, we use propensity score matching to identify the impact that founder, venture, and environmental factors have on the decision to write a formal plan (selection effects). Having isolated these selection effects, we test whether or not these plans help founders achieve venture viability (performance effects). Our results, using data on 1,088 founders, identify two key results: (1) selection effects matter in the decision to plan; and (2) it pays to plan.

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